CHANGSHA, China - Until very recently, Hunan Province was known mainly for lip-searing spicy food, smoggy cities and destitute pig farmers. Mao was born in a village on the outskirts of Changsha, the provincial capital here in south-central China.

Now, Changsha and two adjacent cities are emerging as a center of clean energy manufacturing. They are churning out solar panels for the American and European markets, developing new equipment to manufacture the panels and branching into turbines that generate electricity from wind. By contrast, clean energy companies in the United States and Europe are struggling. Some have started cutting jobs and moving operations to China in ventures with local partners.

The booming Chinese clean energy sector, now more than a million jobs strong, is quickly coming to dominate the production of technologies essential to slowing global warming and other forms of air pollution. Such technologies are needed to assure adequate energy as the world's population grows by nearly a third, to nine billion people by the middle of the century, while oil and coal reserves dwindle.

And part of a lengthy section on how they do it:

Barely a player in the solar industry five years ago, China is on track to produce more than half the world's solar panels this year. More than 95 percent of them will be exported to countries like the United States and Germany that offer generous subsidies for consumers who buy solar panels.

By contrast, the Chinese government has relatively modest solar subsidies for its citizens. Instead it has devoted more money to helping manufacturers, allowing them to cash in on other countries' consumer subsidy programs.

China is also on track to make nearly half of the world's wind turbines this year. China offers financial incentives for utilities to use wind power, which is less costly than solar power, and the country passed the United States last year as the world's largest wind turbine market. Government-subsidized turbine makers are now preparing for large-scale exports to the United States and Europe, which could also result in violations of W.T.O. rules.

Meanwhile, China itself imports virtually no wind turbines or solar panels, instead protecting those developing industries. For example, China until late last year required that 70 percent of the content of each wind turbine and 80 percent of the content of each solar panel be made within China. China quietly dropped that rule after objections from American officials, but also because its own industries had become the world's largest, lowest-cost producers.

China's expansion has been traumatic for American and European solar power manufacturers, and Western wind turbine makers are now bracing to compete with low-cost Chinese exports. This year, BP shut down its solar panel manufacturing in Frederick, Md., and in Spain, and laid off most of the employees while expanding a joint venture in China.

Evergreen Solar of Marlboro, Mass., plans to move the final manufacturing steps for its solar panels from Devens, Mass., to China next summer, eliminating 300 American jobs, after struggling to borrow money in the United States and after finding that costs in China were lower.

David Fuller's view The West is being outsmarted, outflanked and outspent. And what this article does not mention is that China currently has a stranglehold on the essential rare earths metals which are required for high-tech industries.

What does it mean for investors?

A young and diligent colleague, on reviewing Japan's amazing stock market bubble of the 1970s and 1980s said to me earlier today: "If we could only find another one of these we could retire." I said we have two of them - China and India, and they will be even bigger and more enduring.

OK, this is fanciful stuff rather than hard research but I hope it also contains an element of what George Bush Sr. referred to as "the vision thing." No one actually knows what the future holds and Governance is Everything, as Eoin and I repeat like a mantra. Nevertheless, it seems clear to me that there are plenty more reasons for why China and India should be the next big thing, than cogent arguments to the contrary. If so, we are only in the foothills before the Everest of the bull market to follow. I have invested accordingly, as you know.

Returning to the China article above, I can't beat them but I can invest in them. Some people regard this as sleeping with the enemy. I do not see it that way because I like Asia and it has been good to me. I sleep at night in the reasonable expectation that Asia will provide for me via my portfolio.

India's stock market remains in form, so the big debate concerns Chinese equities. Most people are bearish because the widely followed, big-cap Shanghai A-Shares and Shanghai Composite Indices have underperformed since July 2009. This is mainly due to supply in the form of huge IPOs, as I have mentioned before. The largest of these have been from China's banks, which were required to raise their reserve requirements in case of bad property loans. China's government has required them to pass a stress test based on a theoretical 60% decline in the value of property on their loan books. It is important to remember that the 60% figure was a conservative discipline, not a forecast for property prices.

The supply bulge due to IPOs has almost certainly peaked and is likely to dwindle to a trickle in the next two or three months, because the required funding is ending and equity valuations are low. Those valuations for most Chinese equities have returned to historically attractive levels and China's economy continues to grow at a world-beating pace.

I think the two A-Shares indices shown above bottomed in July but they are lagging. For the bigger picture, look at these indices: Nasdaq China Index in USD, Shanghai B Index, Shenzhen B-Shares and the Shenzhen Composite. Without the IPO overhang, these smaller-cap indices are clearly outperforming. The Chinese shares purchased by most westerners are listed on the Hong Kong Hang Seng Index and the Hang Seng China Enterprises (H-Shares) Index. These remain rangebound but appear to be under accumulation and now look less toppy.

In conclusion, I think this is a good time to be investing in China for the next bull run. The best performing sectors are the Healthcare, Consumer Staples and Consumer Discretionary. A raft of China investment vehicles can be found in the Library under China. See also my personal top-10 review on Tuesday.

This evening, I was pleased to spot this commentary by Stephen Green, head of China research at Standard Chartered in Shanghai, writing for Bloomberg. He should know.